Today: A disappointing federal jobs report shows the economy is more sluggish than previously thought, and some experts say now is not the time for Fed to taper off its stimulus program. Plus, Apple (AAPL) gains after moderate e-book penalty, and Facebook and LinkedIn shares continue to climb.

The lead: Weak jobs report casts doubt on Fed tapering

A disappointing federal jobs report Friday showed the economy is recovering more more sluggishly than previously thought, and had investors reconsidering whether the Fed would taper off its economic stimulus program when it meets in two weeks.

Wall Street ended the day almost unchanged, but it was a roller-coaster ride; all three major stock indexes dropped almost 1 percent in the morning, after the Labor Department report was issued, then rebounded to gains of about half a percent in the afternoon before sinking again to close nearly where they began at the opening bell.

According to the report, employers added 169,000 jobs in August, fewer than the 180,000 expected. It also revised the June and July jobs numbers down by 74,000, making the summer the worst three-month stretch for job gains this year. The unemployment rate dropped to 7.3 percent -- a four-and-a-half-year low-- but the drop was attributed to roughly 300,000 discouraged, long-term unemployed people who stopped looking for jobs. That sent the labor force participation rate, which counts the number of adult Americans with jobs or actively seeking work, to 63.2 percent, its lowest mark since 1978.

"Pretty disappointing," Beth Ann Bovino, U.S. chief economist at Standard & Poor's Ratings Services, told the Associated Press. "You saw more people leave the job market and fewer people get jobs. Not a good sign."

The Fed has been pumping $85 billion a month into Treasury and mortgage bond purchases to stimulate the economy, and Fed chairman Ben Barnanke said earlier this year that bond-buying would likely be tapered off this fall as the economy picks up steam. The Fed is set to meet Sept. 17 and 18 to discuss their next move. Between weak job growth, fiscal gridlock in Washington and uncertainty over possible military action in Syria, many experts say now is not the time to cut back.

"The labor market remains stuck in second gear and .... the last thing you want to try to be doing in second gear is drive up a hill," Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities, told the Los Angeles Times. "The Fed should strongly reconsider tapering in September."

Others suggested a Fed tapering may still occur, but at a more measured rate. "A compromise between hawks and doves might be that the tapering will be announced in September but that the purchase amount will be reduced by an even smaller amount than we currently anticipate," Harm Bandholz, chief U.S. economist at Unicredit Research in New York, told Reuters.

 

SV150 market report: Apple gains, Facebook and LinkedIn continue to climb

While the tech-heavy Nasdaq gained just 0.03 percent Friday, the SV150 index of Silicon Valley's biggest companies fared slightly better, gaining a respectable 0.36 percent.

Apple shares rose almost $3, or 0.6 percent, to $498.22 after a federal judge imposed penalties over e-book price-fixing that were less harsh than the Cupertino tech giant feared. Apple was ordered to rewrite its contracts with publishers and a compliance monitor will be appointed to watch over the procedure. In the rumor department, Apple's new desktop OS, Mavericks, which was unveiled at June's Worldwide Developers Conference, will reportedly be released in October. And while two new models of iPhones are expected to be unveiled on Tuesday, Apple may already be looking ahead to its next upgrade, which could include a phone with a 6-inch screen, according to a report by the Wall Street Journal. The current-model iPhone 5 has a 4-inch screen, and a 6-inch version -- which would be among the biggest in the market -- could better compete with Samsung's larger-screen Galaxy models.

Elsewhere in the valley, Sunnyvale-based Internet portal Yahoo (YHOO) dropped 0.21 percent after releasing its first transparency report, in which it said the U.S. government logged 12,444 data requests about 40,000 of its users. While "we regularly push back against improper requests for user data," Yahoo handed over at least some data in 92 percent of the government's requests. Menlo Park-based social network Facebook continued its march toward $45 a share, rising 2.84 percent Friday to close at $43.87, a day after it said it would delay the rollout of new terms of service following recent privacy protests. Mountain View-based professional networking site LinkedIn also continued its upward march, gaining almost 2 percent to close at $253.22, another all-time high closing price. San Jose e-commerce giant eBay (EBAY) rose 1.69 percent after acquiring Seattle-based price-forecasting company Decide.com.

 

Up: Apple, Google, HP, Intel, eBay, Juniper, Zynga, Facebook, LinkedIn

Down: Oracle (ORCL), Cisco (CSCO), VMware, Yahoo, Netflix (NFLX), Tesla

The SV150 index of Silicon Valley's largest tech companies: Up 4.70, or 0.36 percent, to 1,317.02

The tech-heavy Nasdaq composite index: Up 1.23 , or 0.03 percent, to 3,660.01.

The blue chip Dow Jones industrial average: Down 14.98 or 0.01 percent, to 14,922.50.

And the widely watched Standard & Poor's 500 index: Up 0.09, or 0.01 percent, to 1,655.17.

Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Follow Mike Murphy on Twitter at @mmmmurf.